The Year in Review: 2001

Feb. 24, 2002

The year 2001 was neither the best of times nor the worst of times in the ready-to-eat pizza industry.

But despite profit-crushing cheese prices, continued price wars and general sales slowdowns started by the terrorist attacks of Sept. 11 and aggravated by rising unemployment, business appears to be holding steady.

The old saying that what doesn't kill you will only make you stronger applies well to the men and women at the ovens and in the board rooms of pizza companies. Industry watchers have praised the resolve of the leaders in this foodservice segment, and research firms like Technomic have even predicted pizza sales will grow in 2002.

So read on, operators, and take a look at some of the highlights -- and challenges you've overcome -- in the past 12 months.

January

* With memories of 1998's record high cheese prices still in their minds, pizzeria operators are enjoying record low prices. On Jan. 12, 40-pound blocks of cheddar cheese trade on the Chicago Mercantile Exchange for only a $1.06 per pound.

* After a long-standing dispute with Pizza Hut's U.S. headquarters in Dallas, the Minor Food Group, a franchisee of 116 Pizza Huts in Thailand, closed all of its outlets. Six weeks later, and after extensive renovations, all the outlets were reopened under the name The Pizza Company.

February

* After a successful public offering in 2000, Anaheim, Calif.-based California Pizza Kitchen makes a secondary public offering of 4.4 million shares at $25 each.

March

* U.S. restaurateurs post a huge win in the U.S. Court of Appeals Ninth Circuit, when a judge rules that owners can't be held liable for tips not reported by their service staff. Previously, a law had been enacted to make operators pay if sales audits proved questionable.

* Domino's Pizza, based in Ann Arbor, Mich., and Chicago-based Pizzacast announce the test of a Web-phone ordering system in Las Vegas. By setting up a customer profile on the Internet, Domino's customers can place orders in seconds via the Web and a cellular phone.

* Also in March, Domino's reaches a milestone by opening its 7,000th store, located in Brooklyn, N.Y.

* Spago, Wolfgang Puck's famed Hollywood restaurant, closes after 19 years. Puck is widely credited with altering the pizza landscape permanently by being the first to top pies with gourmet ingredients. Over the past three years, Puck has shifted his pizza passion to a namesake product sold from grocers' freezers.

* Boston's, The Gourmet Pizza, a 150-store chain based in Richmond, British Columbia, continues its south-of-the-border run by establishing a U.S. headquarters in Dallas.

* On March 30, block cheddar prices rise to $1.35 a pound, pinching pizzeria operators' profits significantly for the first time in more than a year.

April

* Five top executives at Uno Restaurant Corp., parent company of 172-store Pizzeria Uno Chicago Bar & Grill, take the West Roxbury, Mass., company private after years of uninspiring stock market returns.

* Pizza Hut becomes the world's first company to deliver a pizza in outer space. The pie in the sky was delivered by Russian cosmonauts journeying to the International Space Station.

* Joe Keagle, a Paul Revere's Pizza franchisee in Mt. Pleasant, Iowa, notches his name in the Guinness World Book of Records as the creator of the largest commercially available pizza. The pizza, which covers 1,814 square-inches and weighs 35 pounds is named "The Ultimate Pizza Party." Customers who purchase the Ultimate pay $99.95 for each pie.

* After 10 years of waiting for the expiration of their non-compete contracts with Pizza Hut, former Pizza Hut vice presidents, Perry Ludy and Terry Huffman start Cutting Edge Pizza by purchasing 59 Little Caesars stores. Over the next five years, the Hartford, Connecticut-based company wants to own 350 such stores.

June

* The rise in block cheddar cheese prices continues unabated, hitting $1.67 a pound on June 21 and remaining there until Aug. 9.

July

* As gas prices rise above $3 per gallon in some metro areas, operators hunt for ways to offset the unexpected cost. Among those assessing delivery fees 50 cents to $1.50 were a handful of Pizza Hut, Domino's and Papa John's store operators. Many other operators offer customers cut-rate carryout deals.

August

* Chicago Pizza & Brewery, Inc., headquartered in Huntington Beach, Calif., completes a private placement of 3.2 million shares of common stock to its largest shareholder, BJ Chicago LLC , on August 20. Price per share for the deal was $2.50, and was worth $8 million.

* Two oven giants in the pizza industry, Middleby Marshall and Blodgett join forces when Middleby buys out its old rival for $80 million in cash and $15 million in notes.

* After years of mediocre valuation in the stock market, NPC International, a Wichita, Kan. franchisee of 834 Pizza Huts, and PJ America Inc., Birmingham, Ala., a franchisee of 176 Papa John's stores, take their companies private. Buy-backs of both companies were made by their founders.

* Milford, Conn.-based Subway widens a test of personal-size pizzas at approximately 30 of the chain's 15,570 stores. Though it co-brands with Baltimore-based mama ilardo's and Indianapolis-based Noble Roman's, the occasion marks the first time the chain has produced its own.

* Schlotzsky's, headquartered in Austin, Texas, launches a national advertising push on its own pizzas.

* Sept. 11, terrorist attacks on the New York City's World Trade Center and the Pentagon in Washington, D.C., shock the world as thousands perish. Pizzeria operators report a brief spike in sales as customers stay glued to TV sets eating pizza dinners.

* Pizza companies in and around New York and Washington rally to feed thousands of volunteers involved in the rescue efforts. And more than 220 Pizza Inn stores around the country donate their Sept. 16 sales -- more than $500,000 -- to relief funds for victims.

* After peaking briefly at $1.78 a pound on August 24, cheese prices begin to slide when a revised USDA Cold Storage Report shows an upward revision in the nation's cheese inventory of 31 million pounds. The price ends the month at $1.64 a pound.

October

* Galaxy Nutritional Foods, maker of Veggie Mozzarella, a soy-based alternative to dairy cheese, reports positive results to its test of the product at 43 Pizza Hut franchise stores in the greater Fort Wayne, Ind., area. Later the following month, it announces that Melleville, N.Y.-based Sbarro will use the product in its 800 stores nationwide.

* Hurt by sales declines at its airport and mall stores, Sbarro reported the closure of 48 restaurants in its October report.

* Sales at several Manhattan pizzerias near Ground Zero in Manhattan continue struggling to return to business as normal. At legendary Lombardi's, owner John Brescio reports that sales are only 60 percent of what they should be in the fall.

* The California Tomato Growers Association reports about 7 percent of the process tomato crop was lost when record heat hit the state in May. Industry experts predict the cost of process tomato products will rise about 50 cents to $1 per case in 2002.

* A sign that the national recession is having an impact on pizza companies, Pizza Hut and Papa John's report sharp sales declines in the third quarter. All isn't so gloomy, however, as Domino's Pizza and Dallas-based Chuck E. Cheese (CEC Entertainment) report positive numbers for the same period.

* A federal magistrate rules that Louisville, Ky.-based Pizza Magia International LLC, deliberately misrepresented its compliance with a judge's order in a federal trademark lawsuit brought by Papa John's. Pizza Magia is owned by Dan Holland, president of Papa John's from 1990 to '95.

* Cheese prices bottom out at $1.16 per pound Oct. 24, but concern over the slowing economy gives operators little to celebrate.

* On Oct. 30, the Western United Dairymen (WUD), based in Modesto, Calif., call on USDA secretary Ann Veneman to conduct an investigation into a substantial revision of July cheese inventories. The group is concerned that the original report, which under-reported the nation's cheese inventory, may have contributed to the sharp drop in cheese prices.

November

* PizzaMarketplace.com launches the pizza industry's first and only daily news Web portal.

* Domino's Pizza International, Inc. purchases the majority equity interest in Dutch Pizza Beheer B.V., headquartered in Raamsdonksveer, in order to establish a base for its European operations.

December

* The Canadian Dairy Council votes to raise industrial milk prices 3.5 percent in 2002. The country's restaurant association estimates the increase will cost Canadian restaurateurs more than $65 million.

* Tricon Global Brands, parent company of Pizza Hut, announces plans for aggressive growth in 2002, including the addition of 1,400 new fast-food stores. Specific numbers of Pizza Huts that will be added were not revealed, though the company did say it will add 75 new dine-in and delivery outlets to the 450 it currently runs in the United Kingdom.